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Submission of the State of Victoria Submission of the State of Victoria House of Representatives Standing Committee on Employment, Workplace Relations and Workforce Participation Inquiry into Independent Contracting and Labour Hire Arrangements Contact: Industrial Relations Victoria Level 3, 55 Collins St Melbourne VIC 3000 Phone (03) 9651 9200 Fax (03) 96519333 (Ref A.Lester, M. O’Connor) TABLE OF CONTENTS 1 Introduction..........................................................................................................3 2 Victorian developments.......................................................................................4 2.1 Labour Hire Inquiry ...................................................................................4 2.2 Child employment......................................................................................6 2.3 Outworkers.................................................................................................7 2.4 Owner Drivers and Forestry Contractors...................................................8 3 Disadvantages of Independent Contracting and Labour Hire ......................10 3.1 Dependent Contractors: inability to control working arrangements........11 3.2 Profitability of contractors and business insolvency ...............................14 3.3 Retirement savings...................................................................................16 3.4 Findings of Victorian Inquiry into Owner Drivers and Forestry Contractors...............................................................................................18 3.5 Sustainable Workforce Participation and Skilled Labour........................19 4 Policy underpinnings .........................................................................................20 4.1 Freedom of Contract................................................................................20 4.2 Characterisation of approach ...................................................................22 4.3 Commercial Law versus Workplace Relations Law................................22 5 DEWR proposals for ways Independent contracting can be pursued consistently across state and federal jurisdictions ..........................................23 6 Specific response to DEWR proposals .............................................................24 6.1 Preventing restrictions on independent contracting and labour hire in awards/agreements...................................................................................24 6.2 Definition of independent contractor, employee and employer...............26 6.3 Mechanism for determining who is, and who is not, an employee..........30 6.4 New object to the Act ..............................................................................32 6.5 Consistency across State and Federal Jurisdictions: Should the Commonwealth override State and Territory laws? ................................33 6.6 Ensuring independent contracting arrangements are legitimate: proposal to create a national unfair contracts regime .............................................34 6.7 Civil penalty for persons seeking to avoid an employment relationship by using sham arrangements.........................................................................42 6.8 Regulating the labour hire industry..........................................................42 7 Other issues.........................................................................................................42 7.1 Collective negotiations by contractors under the Trade Practices Act ....42 7.2 Capacity to apportion damages in unfair dismissal payments between a host employer and labour hire employer. ................................................43 7.3 Multi-employer agreements to include labour hire operators..................44 2 1 Introduction Victoria welcomes the Inquiry of the House of Representatives Standing Committee on Employment, Workplace Relations and Workforce Participation on Independent Contracting and Labour Hire Arrangements. As a major stakeholder in the federal industrial relations system, it is vital that Victoria be given every opportunity to participate in debates and provide input to policy development on the nature of the federal system. Victoria supports a national unitary system of industrial relations that maintains protection for workers and promotes economic prosperity. The discussion paper contains some significant opportunities to work towards national consistency, and these should not be lost. Victoria is opposed however to any move to override State and Territory laws with respect to these matters. The Federal Government should work with the States and Territories to develop nationally consistent solutions. Victoria notes the release by the Department of Employment and Workplace Relations (DEWR) of a discussion paper titled “Proposals for Legislative Reforms in Independent Contracting and Labour Hire Arrangements” (henceforth ”the DEWR Paper”). That discussion paper put forward a number of specific legislative proposals that form a useful guide to the policy debate surrounding labour hire and independent contracting, and to which this submission responds. Victoria has also made a submission in response to the DEWR Paper which is consistent with this submission. Victoria’s submission focuses on two of the terms of reference of the Inquiry, of particular relevance to Commonwealth /State relations: • ways independent contracting can be pursued consistently across state and federal jurisdictions; • strategies to ensure independent contract arrangements are legitimate. The remaining two terms of reference relate to matters that are currently the subject of an Inquiry of the Victorian Parliament. That Inquiry is discussed in section 2 below. Once the Victorian Inquiry has reported, Victoria will advise the Committee of that report that deal with the remaining terms of reference: • the status and range of independent contracting and labour hire arrangements; • the role of labour hire arrangements in the modern Australian economy. This submission is structured as follows: 3 Section 1 Introduction Section 2 Provides a summary of relevant Victorian policy and developments and legislation. Section 3 Sets out information on the advantages and disadvantages of labour hire and contracting arrangements. Section 4 Provides an analysis of the policy underpinnings of the workplace relations system. Section 5 Summarises the proposals made by DEWR for ways independent contracting can be pursued consistently across state and federal jurisdictions. Section 6 Provides Victoria’s specific responses to the legislative proposals made in the DEWR Paper. Section 7 Raises some additional matters 2 Victorian developments Set out below are details of recent relevant policy and legislative developments in Victoria that will be of interest to the Committee: • The Victorian Parliamentary Inquiry into Labour Hire. • Legislation dealing with outworkers in the clothing and textile industry. • Legislation dealing with child employment – providing a broad definition of employment. • Victorian Inquiry into owner drivers and forestry contractors and the introduction of a Bill into Parliament dealing with these small businesses. 2.1 Labour Hire Inquiry On 3 June 2003, the Victorian Legislative Assembly resolved to require the Economic Development Committee to report on the extent of labour hire employment in the state, and the consequences of its use. On 20 December 2004 the Committee presented Parliament with an interim report containing a number of recommendations.1 At the same time, it wrote to a number of stakeholders seeking comment on some of the issues raised in the interim report. The Committee is due to provide a final report by 31 May 2005. A copy of the final report will be provided to the Committee as soon as it is available. The Committee’s interim report notes that since the 1990s, labour hire has become an increasingly prominent feature of the Australian labour market. The Committee was informed that there were currently around 1,200 labour 1 A copy of the interim report and the full terms of reference can be found at: http://www.parliament.vic.gov.au/edevc/inquiries/Labour_Hire 4 hire agencies in Victoria. It received evidence that the major reasons for employers to engage labour hire workers were flexibility and cost. As described by the Committee, themes that emerged in the evidence included: • Ambiguity in the relationship between agency, host and worker; • Concern about the high levels of casual employment in the industry; • A lack of regulation which was claimed to contribute to disreputable practices; and • The creation of a divisive culture within workplaces. The interim report notes that some labour hire workers in Victoria are covered by federal industrial relations instruments, but others are only covered by the bare minimum conditions of Schedule 1A of the Workplace Relations Act 1996 (the WR Act). The introduction of federal common rule awards in Victoria from 2005 will see the number of labour hire employees covered by comprehensive safety net awards increase. The focus of the interim report is on matters relating to occupational health and safety (OHS) and accident compensation. The Committee found that while a number of labour hire operators achieved best practice standards in OHS, there was persuasive evidence to suggest that OHS outcomes in the labour hire industry were, on average, considerably poorer than in other industries. Reasons for this finding include: constant exposure
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